Bittrex settles with SEC over unregistered securities charges

The SEC on Thursday reached a settlement with the now-bankrupt Bittrex and its former chief executive, with the company agreeing to pay the regulator $24 million. 

The settlement agreement brings to an end a long-running dispute between the SEC and Bittrex Inc., the parent company of two affiliates named in the lawsuit, as well as former CEO William Shihara. 

Bittrex did not confirm nor deny fault as part of the deal, with the SEC saying in court documents that the settlement resolves liability in connection with its case. The agreement must still be confirmed by a court. 

The $24 million in cumulative settlement payments, which includes interest accrued since the start of the proceedings, under the agreement would be paid out 60 days after the conclusion of Bittrex’s bankruptcy proceedings. 

“For years, Bittrex worked with token issuers to ‘scrub’ their online statements of any indicia that they were investment contracts—all in an effort to evade the federal securities laws. They failed,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement, in a statement. 

“We are delighted to have reached a settlement agreement with the SEC so quickly following the submission of our motion to dismiss. The agreement has now been submitted to the court for approval,” Bittrex Global said in a statement.

Bittrex was charged by the SEC in April, with the regulator claiming that the company operated as an unregistered broker, exchange and clearing agency. A foreign affiliate of Bittrex, which had been charged with operating an unregistered securities exchange, joined the settlement. 

The SEC also claimed Shihara — who led the company from 2014 to 2019 — made “problematic statements” that were later deleted from public channels to keep the SEC from investigating.

“This is a good outcome. It’s vital that our country strikes a balance between fostering innovation, encouraging entrepreneurs and the need to protect consumers, and I hope today’s proposed settlement helps move that forward,” Shihara said in a statement.

Similarly to the suits filed against Coinbase and Binance, the SEC also alleged that some assets offered by Bittrex were unregistered securities. Under the agreement, both Bittrex and Shihara were banned by the SEC from carrying out a number of key financial functions unless they register as a broker dealer. 

Prior to the settlement, crypto investment firm Paradigm had stepped up to defend Bittrex, claiming that the SEC had overstepped its jurisdiction. 

“The SEC lacks the authority to regulate secondary markets for crypto assets because they do not involve ‘investment contracts’ and are therefore not securities transactions under the agency’s remit,” Paradigm wrote in July. 

In early May, Bittrex filed for bankruptcy, just weeks after the SEC filed its complaint. It officially shuttered earlier this summer, and is currently in the middle of bankruptcy proceedings.

Updated Aug. 10, 2023 at 6:03 pm ET: Added statement from Bittrex Global.

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